Outlook for the Continental Group

Forecast process

Each year, Continental forecasts the values of key performance indicators for the Continental Group for the new fiscal year. These include sales and the adjusted EBIT margin for the Continental Group and for the Automotive, Tires, ContiTech and Contract Manufacturing group sectors.

In addition, we provide information on the assessment of important factors influencing earnings before interest and tax (EBIT). These include the expected development of special effects and the amount of amortization from purchase price allocations. We thus allow the Continental Group’s expected EBIT to be estimated.

Furthermore, we give an assessment of the development of the financial result before effects from currency translation and before effects from changes in the fair value of derivative instruments, and other valuation effects, as well as the tax rate for the Continental Group. This allows a reconciliation to expected net income. We also publish a forecast of the capital expenditures planned for the current year and the adjusted free cash flow. Our forecast is based on our expectations regarding the most important production and sales markets in the new fiscal year.

We publish our forecast as part of our annual press conference and the publication of our annual report. It is continually reviewed over the course of the fiscal year. Possible changes to the forecast are described at the latest in the report for the respective quarter.

Comparison of the past fiscal year against forecast

In our forecast for fiscal 2024, which we published in March 2024, we expected the global production of passenger cars and light commercial vehicles to be roughly on a par with the previous year, with a negative development expected in our core market of Europe.

The outlook took into account the tense geopolitical situation and its expected impact on production volumes in 2024.

Higher costs for wages and salaries – amounting to around €0.5 billion – were also expected to weigh heavily on our earnings position, with around half of these costs attributable to the Automotive group sector.

Based on the above assumptions as well as on the exchange rates at the beginning of the fiscal year, we expected the following key financial figures for fiscal 2024:

• We expected the Continental Group to achieve sales in the range of around €41.0 billion to €44.0 billion and an adjusted EBIT margin of around 6.0% to 7.0%.
• We expected our Automotive group sector to achieve sales of around €20.0 billion to €22.0 billion. We expected the adjusted EBIT margin to be around 3.0% to 4.0%.
• We expected our Tires group sector to achieve sales of around €14.0 billion to €15.0 billion and an adjusted EBIT margin of around 13.0% to 14.0%.
• We expected our ContiTech group sector to achieve sales of around €6.6 billion to €7.0 billion and an adjusted EBIT margin of around 6.5% to 7.5%.
• In our Contract Manufacturing group sector, we anticipated sales of around €200 million to €300 million and an adjusted EBIT margin of around 0%.
• Consolidated amortization from purchase price allocations was expected to be around €100 million and affect mainly the Automotive and ContiTech group sectors.
• In addition, we expected negative special effects of around €450 million.
• In 2024, we expected the negative financial result to be around €350 million before effects from currency translation, effects from changes in the fair value of derivative instruments, and other valuation effects.
• The tax rate was expected to be around 27%.
• The capital expenditure ratio was expected to be around 6.0% to 7.0% of sales in fiscal 2024.
• In 2024, we were planning on adjusted free cash flow of approximately €0.7 billion to €1.1 billion.

The outlook remained unchanged in the quarterly statement for the first quarter of 2024.

In the half-year financial report, we adjusted our outlook for fiscal 2024 due to the following factors:

• We expected the global production of passenger cars and light commercial vehicles to decline by 1% to 3% year-on-year.

Assuming exchange rates would not change significantly as the year progressed, this meant that the following adjustments were made to the outlook for fiscal 2024:

• Consolidated sales were expected to be in the range of around €40.0 billion to €42.5 billion, and the adjusted EBIT margin was expected to be around 6.0% to 7.0%.
• For the Automotive group sector, sales were expected to be around €19.5 billion to €21.0 billion, with an adjusted EBIT margin of around 2.5% to 3.5%.
• For the Tires group sector, sales were expected to be around €13.5 billion to €14.5 billion, with an adjusted EBIT margin of around 13.0% to 14.0%.
• We expected our ContiTech group sector to achieve sales of around €6.6 billion to €7.0 billion and an adjusted EBIT margin of around 6.5% to 7.0%.
• We expected negative special effects of around €350 million.
• Adjusted free cash flow was expected to be around €0.6 billion to €1.0 billion.

The other parts of the outlook remained unchanged.

In the quarterly statement for the third quarter of 2024, we adjusted the following estimate:

• We expected the industrial business worldwide to remain sluggish.

With respect to the key financial figures, we made the following changes:

• Consolidated sales were expected to be in the range of around €39.5 billion to €42.0 billion, and the adjusted EBIT margin was expected to be around 6.0% to 7.0%.
• We expected our ContiTech group sector to achieve sales of around €6.2 billion to €6.6 billion and an adjusted EBIT margin of around 5.8% to 6.3%.
• The tax rate was expected to be around 30%. The higher calculated tax rate compared with the previous assumption was mainly due to the allocation of net income to the different countries in relation to comprehensive income. Tax charges that are not directly dependent on income also continued to have an effect. These include foreign (minimum) taxes with deviating bases of assessment as well as foreign withholding taxes that are not deductible in Germany. Added to this were tax risks in connection with ongoing criminal tax investigations by Italian authorities. As a precautionary measure, provisions were set aside for likely financial charges in this regard.

All other parts of the outlook remained unchanged.

Owing to our operating performance in the fourth quarter, we achieved the following results for fiscal 2024:

• The Continental Group generated sales of €39.7 billion and an adjusted EBIT margin of 6.8%.
• The Automotive group sector generated sales of €19.4 billion and an adjusted EBIT margin of 2.3%.
• The Tires group sector generated sales of €13.9 billion and an adjusted EBIT margin of 13.7%.
• The ContiTech group sector generated sales of €6.4 billion and an adjusted EBIT margin of 6.2%.
• The Contract Manufacturing group sector generated sales of €0.2 billion and an adjusted EBIT margin of 2.9%.
• Total consolidated expense from special effects amounted to €300 million in 2024.
• Amortization from purchase price allocations was €109 million.
• In the year under review, the negative financial result amounted to €346 million before effects from currency translation and before effects from changes in the fair value of derivative instruments, and other valuation effects.
• Income tax expense for fiscal 2024 amounted to €689 million. The tax rate was 36.5%.
• The capital expenditure ratio was 5.5%.
• Adjusted free cash flow was €1,052 million in 2024 and therefore slightly above our forecast range of €0.6 billion to €1.0 billion in the quarterly statement for the third quarter of 2024.

Order situation

The order situation in our Automotive group sector continues to be characterized by weak production figures, delayed production launches and the transformation of the automotive industry. In total, orders amounting to around €19 billion were acquired in fiscal 2024 (PY: €27 billion). This figure includes expected sales over the entire duration of the delivery, known as lifetime sales. These are based primarily on assumptions regarding production volumes of the respective vehicle or engine platforms, the expected and agreed cost adjustments, and the development of key raw material prices.

The replacement-tire business accounts for a large portion of the Tires group sector’s sales, which is why it is not possible to calculate a reliable figure for order volumes.

The same applies to the ContiTech group sector, which has business areas operating in various markets and industrial sectors, each in turn with their own relevant factors. Consolidating the order figures from the various business areas of the ContiTech group sector would thus be meaningful only to a limited extent.

Outlook for fiscal 2025

As mentioned on page 90 of the report on expected developments, we expect the global production of passenger cars and light commercial vehicles in 2025 to be roughly on a par with the previous year, with a negative development expected in our core markets of Europe and North America.

This outlook takes into account the current tense geopolitical situation and its expected impact on production volumes in 2025. It does not take into account potential significant changes to global tariffs, however.

All figures take into account the exceptions and definitions specified in each case in the comparison against forecast.

Based on the above assumptions as well as on the exchange rates at the beginning of the fiscal year, we expect the following key financial figures for fiscal 2025:

• We expect the Continental Group to achieve sales in the range of around €38.0 billion to €41.0 billion and an adjusted EBIT margin of around 6.5% to 7.5%.
• We expect our Automotive group sector to achieve sales of around €18.0 billion to €20.0 billion. We expect the adjusted EBIT margin to be around 2.5% to 4.0%.
• We expect our Tires group sector to achieve sales of around €13.5 billion to €14.5 billion and an adjusted EBIT margin of around 13.3% to 14.3%.
• We expect our ContiTech group sector to achieve sales of around €6.3 billion to €6.8 billion and an adjusted EBIT margin of around 6.0% to 7.0%.
• In our Contract Manufacturing group sector, we anticipate sales of around €100 million to €200 million and an adjusted EBIT margin of around 0%.
• Consolidated amortization from purchase price allocations is expected to be around €100 million and affect mainly the Automotive and ContiTech group sectors.
• In addition, we anticipate negative special effects of around €700 million.
• In 2025, we expect the negative financial result to be around €350 million before effects from currency translation, effects from changes in the fair value of derivative instruments, and other valuation effects.
• The tax rate is expected to be around 27%.
• The capital expenditure ratio is expected to be around 6.0% of sales in fiscal 2025.
• In 2025, we are planning on adjusted free cash flow of approximately €0.8 billion to €1.2 billion.